Aphria records fifth consecutive quarter of profitability

LEAMINGTON, ONTARIO–(Marketwired – April 13, 2017) – Aphria Inc. (“Aphria” or the “Company”) (TSX: APH) (OTC: APHQF) today reported its third quarter results, for the three and nine months ended February 28, 2017. All amounts are expressed in Canadian dollars.

Raised $53,869,357 in a bought deal financing which closed on February 24, 2017

Received final approval to list on the Toronto Stock Exchange (“TSX”). Shares commenced trading on the TSX and were delisted from the TSX-Venture Exchange on March 22, 2017

With five consecutive quarters of profitability and further growth in our production capacity, Aphria continued to build strong, positive momentum in the third quarter. Despite unusual weather conditions that temporarily added to our growing costs for the quarter, we continue to report costs per gram that are among the lowest in the industry.

Vic Neufeld, Chief Executive Officer, Aphria

At the same time, we are making strategic investments that will increase our supply of high-quality cannabis and position Aphria to drive further growth in our medical-grade cannabis business, meet future demand for recreational cannabis, and drive strong, sustainable shareholder value creation.

Financial highlights

For the fifth consecutive quarter, the Company reported profitability. In the last five quarters, the Company reported income before tax of $3,720, $102,164, $895,269, $945,678 and $4,950,250, respectively. The increased pre-tax profitability is primarily a result of the increase in fair value of long-term investment portfolio.

The Company continued to report strong EBITDA levels, reporting $1,005,073 of EBITDA in the quarter. This is the Company’s third consecutive quarter with EBITDA greater than $1 million. Reported EBITDA levels reflect the Company’s continued focus on low cost producer status and industry leading patient care service.

Revenue for the three months ended February 28, 2017 was $5,118,516, representing a 2% decrease over the prior quarter’s revenue of $5,226,589. The decrease in revenue for the quarter was consistent with expectations and was primarily a result of the $8.50 per gram cap placed on the price of medical cannabis for veterans. The impact of the price cap on revenue was offset by increased revenue per gram for non-veterans, primarly a result of selling less wholesale product and the continued growth of our cannabis oils.

Adjusted gross profit for the third quarter was $3,582,312 with an adjusted gross margin of 70.0%, generated from both retail and wholesale shipments of medical cannabis. The decrease in the adjusted gross margin from the prior quarter is consistent with the reduction in revenues in the quarter.

During the quarter, our “all-in” costs of dried cannabis per gram increased from $1.79 in the prior quarter to $2.23 in the current quarter, representing a $0.44 increase. The increase largely related to abnormal winter weather conditions in Leamington but also included costs related to preparing for our Part II expansion.

This winter the Leamington area experienced unusual conditions related to the amount of sunlight it received. The most common measure of light intensity is referred to as lumens. During the quarter, the Leamington area received approximately 80% of the historical three-year average of lumens for this period. More specifically, the month of January was 67% of the three-year lumen average and the month of February was 76% of the three-year lumen average. This reduced lumen measure directly led to (i) lower yields on individual cannabis plants during the quarter which caused a $0.20 increase in our “all-in” costs of dried cannabis per gram; and, (ii) increased heating and electrical costs, which caused a $0.14 increase in our “all-in” costs of dried cannabis per gram.

The remaining $0.10 per gram related to incremental labour costs as we added greenhouse staff during the quarter so they would be fully trained to work in our Part II expansion, the moment the area is approved by Health Canada. As we move from Health Canada’s approval to use our Part II expansion toward the first sale from that area, we will continue to incur incremental labour costs in our vault and packaging staff. These incremental costs will be directly tied to revised head counts as we properly train staff in advance of additional product flow that will result from the increase in our annual harvest from 2,600 kgs to 8,000 kgs.

Net income for the three months ended February 28, 2017 was $4,950,250 or $0.04 per share as opposed to a net income of $3,720 or $0.00 per share in the same quarter in the previous year and an income before tax of $945,678 or $0.01 per share in the previous quarter.

EBITDA for the third quarter was $1,005,516, compared to an EBITDA of $423,350 in the same period of the prior year and EBITDA of $1,198,620 in the previous quarter.

We have A Good Thing Growing.

About Aphria

Aphria Inc., one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis. Located in Leamington, Ontario, the greenhouse capital of Canada. Aphria is truly powered by sunlight, allowing for the most natural growing conditions available. We are committed to providing pharma-grade medical cannabis, superior patient care while balancing patient economics and returns to shareholders. We are the first public licenced producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.

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